Central Banks

Written by Togzhan Batyrbekova.

A central bank is the center of an economy's banking system. They are responsible for regulating other banks, controlling the economy’s monetary policy, and providing services to banks and the government. 

Monetary policy is the management of money supply and interest rates. The money supply is the amount of money circulating in an economy, and the central bank controls it by controlling the number of banknotes and coins issued. The Monetary policy is designed to achieve the macroeconomic goals of stabilizing the national currency, keeping unemployment at low rates, and maintaining a low and steady rate of inflation. 

Central banks regulate other banks by making sure they have financial stability, which is done in order to ensure that the depositor’s money is protected and not at risk. This is done by setting regulations that are designed to keep the banks stable. 

Central banks have members, which consist of the government and commercial banks, to whom they lend money when needed. They also act as a lender of last resort both for the government and the commercial banks. This means that in case of liquidity shortages, which is a situation when a financial institution lacks sufficient funds or assets to complete its role, the central bank will lend money to the commercial bank or government. This is done to ensure consumer confidence in a banking system, something that is very important as it determines whether or not consumers will be willing to put their savings in a bank.